Guangdong Lingxiao Pump IndustryLtd (SZSE:002884) sheds 8.7% this week, as yearly returns fall more in line with earnings growth

Guangdong Lingxiao Pump Industry Co.,Ltd. (SZSE:002884) shareholders might be concerned after seeing the share price drop 26% in the last quarter. On the bright side the returns have been quite good over the last half decade. It has returned a market beating 62% in that time.

Although Guangdong Lingxiao Pump IndustryLtd has shed CN¥544m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for Guangdong Lingxiao Pump IndustryLtd

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, Guangdong Lingxiao Pump IndustryLtd achieved compound earnings per share (EPS) growth of 5.0% per year. This EPS growth is slower than the share price growth of 10% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Guangdong Lingxiao Pump IndustryLtd, it has a TSR of 135% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Guangdong Lingxiao Pump IndustryLtd has rewarded shareholders with a total shareholder return of 2.3% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 19% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Guangdong Lingxiao Pump IndustryLtd better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Guangdong Lingxiao Pump IndustryLtd .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Chinese exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com